HomeNewsAlternate approach to South Africa’s EDI performance and restructuring

Alternate approach to South Africa’s EDI performance and restructuring

Faced with criticism related to the performance of South Africa’s electricity distribution sector associated with the failure to form regional electricity distributors (REDs) the South African Local Government Association (Salga) has considered alternatives.

In Mid 2013 a workshop was held to debate possible alternative approaches to South Africa’s electricity distribution industry. This attendance included several members of the Association of Municipal Electricity Utilities (AMEU) standing committee, Eskom, the National Energy Regulator of South Africa (NERSA), the Energy Intensive Users Group (EIUG) as well as Salga staff. Notable absentees were representatives of DoE (to which the electricity distribution industry (EDI) restructuring mandate was conferred following the demise of EDI Holdings) and the labour unions, both of whom were invited. The issue was later workshopped by Salga through its regional branches.

In November 2013 Tubatsi Moloi of Salga gave a presentation to the AMEU Technical Committee. He made it very clear that Salga was not promoting restructuring of the electricity distribution industry. It was merely being proactive in attempting to deal with the widespread concern about the poor and decreasing reliability of the electricity distribution network and investigate possible reforms needed in the electricity distribution industry to improve its reliability and effectiveness.

Thus far the process has resulted in the following recommendations for an approach to the reform of the sector that does not require an amendment to South Africa’s constitution, as would have been the case in establishing REDs, and that uses the existing policy and legislative framework. Its approach is that:

  • Local governments retain the responsibility for electricity distribution, as provided in the constitution, but have an obligation to ensure that the service is provided reliably and cost-effectively (in terms of national minimum standards).
  • National government enters into a joint regulatory compact with NERSA and Salga to ensure that local governments are held accountable for performance in terms of clear operating licence conditions and with a credible threat of withdrawal of the licence where licence conditions are not met.
  • Local governments continue to provide electricity themselves where they are able to do so reliably and cost-effectively.
  • Where local governments do not wish to (or are not able to) provide electricity reliably and cost-effectively, municipalities enter into a service delivery agreement with a competent and efficient electricity distributor.